Corpus ID: 202707220

Equity Issuance of Distressed Firms : Debt Overhang or Agency Problem ? May 25 th , 2017

  title={Equity Issuance of Distressed Firms : Debt Overhang or Agency Problem ? May 25 th , 2017},
  author={James L. Park},
This study empirically tests whether firms are more likely to issue equity when distressed. Contrary to Myers’ (1977) debt overhang predictions, I find that all else being equal, distressed firms issue more equity compared to less-distressed firms, and this disparity is greater for firms with weaker governance. Moreover, I find distressed equity issuing firms yield lower delisting and CEO turnover rates in the short-horizon but eventually increase to similar levels of comparable distressed firm… Expand
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